Sustainability questions remain despite additional funding, says NAO

Its report, Sustainability and transformation in the NHS, published today, said additional funding in the sustainability and transformation fund (STF) had been used to cope with activity pressures rather than changing services to meet future needs.

The £1.8bn STF in 2016/17 was designed to give the NHS breathing space before funding growth declined in 2017/18 and it had improved NHS finances. Overall, the financial position moved from a £1.8bn deficit in 2015/16 to a £11m surplus in 2016/17. Looking closer at the figures, the total trust deficit fell from over £2.4bn to £791m in the same period. Clinical commissioning groups’ aggregate underspend increased to £154m, though more CCGs reported a deficit in 2016/17 (62) than in 2015/16 (32).

The NAO called for a reassessment of the best way to allocate the STF and recommended system-wide incentives and regulation should go further and their introduction be accelerated.

Despite the availability of the STF, trusts still required one-off funding, mostly in the form of loans from the Department of Health. This additional cash support increased from £2.4bn in 2015/16 to £3.1bn the following year. This included £2.7bn in interest-bearing loans in 2016/17. The NAO pointed out that this funding had made the trusts’ financial position worse.

The NAO recommended that the Department, NHS England and NHS Improvement should look again at their approach to funding flows and management – this included the policy of higher interest rates for trusts already in deficit and the risk reserve held by CCGs that has been used to balance trust deficits.

Trusts were also struggling to hit performance targets due to rising demand and pressure on budgets. And efforts to rebalance NHS finances – such as moving capital funds to revenue – had restricted the funding available to transform services for the long term. Transformation was essential to ensuring the NHS meets demand, increases efficiency and improves services to patients, it added.

There should be greater clarity on the fundamental financial pressures facing trusts when allocating funds; capital funding for transformation and backlog maintenance should be clearly set out; and there should be greater support for local partnerships making the slowest progress, the auditors said.

CCGs and trusts were increasingly reliant on non-recurrent measures to achieve cost savings plans. The report said the proportion of CCG savings that were non-recurrent rose from 14% to 17% between 2014/15 and 2016/17. For providers, one-off savings as a percentage of the total increased from 14% to 22%. This posed a significant risk to financial sustainability, it added

Amyas Morse (pictured), head of the National Audit Office, warned that one-off funding injections were not in taxpayers’ interests.

‘The NHS has received extra funding, but this has mostly been used to cope with current pressures and has not provided the stable platform intended from which to transform services,’ he said. ‘Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements.’

Chris Hopson, chief executive of NHS Providers, said trust had improved their overall financial position while treating more patients. However, for the first time, all the major performance targets had been missed.

‘Extra funding to facilitate better, more convenient and sustainable ways of providing care for patients was used up just keeping the show on the road,’ he added. ‘And some of the short-term measures to raise revenue, such as the raids on capital budgets, meant planning for the future was further compromised.’

He called for an urgent review of long-term health and social care funding.